Tenders and Bidding 101

September 12, 2012

Lowest Price = Lowering the Bar

It is almost indelibly coded in the government system to select the lowest bidder for any given project. Even when the technical criteria have come in, many a times the final selection is still L1 (a term understood by all who have been through a bidding procedure even once). Why not? The client gets the best of both – Product as per specified terms, and that too at the best rate. The ground is level; playing field is open to all. Things are transparent and the auditor has no reason to complain. What is wrong with that?

Answer: It’s an inbuilt black-hole for neutral judgement that professionals take pride in. Take for example, a project to survey, digitize the land related data, and reconstitute all parcels of land within a specific area. Imagine the money at stake for those who own those lands. We know that the amount of money one can make by knowing where the roads are going is always and ever going to be higher than any consultancy a local authority will pay to get the design. Similarly, the amount of money a contractor will be willing to pay to an architect to avoid unnecessary problems during the process of construction of a public building is always higher than the money the architect may be able to charge the government for designing that building. As it is this is a moral dilemma. Now, what complicates the equation further is the idea of L1/ Selection of the lowest bidder.

Suppose the theory of charging fees as defined by a professional body like Council of Architecture is a good yardstick. According to that, about 4% of construction cost of a project are appropriate designing fees. Adding 1.5% to that if the scope includes coordinating with other consultants and periodic supervision at site will bring it to 5.5%. This is what they also teach you in Professional Practice class in University.

But in reality, how many projects are designed at that fee? The designer, aka bidder, is required to quote the lowest %. And this goes down to 3 (Highest), 2.89, 1.89 or even 0.6% depending upon the case. And this includes site supervision, often full time. Within this same quote is to be accommodated any delays, revisions (plenty), extra work and the possibility that the decision makers will be transferred, all the decisions would be overturned and a complete redesign could be required even after the designer has reached detail drawings’ stage. The cost of managing idiosyncratic or anxious lower as well as higher ranks of officials too is borne by the designer. This implies innumerable phone calls, visits, unstructured calls for revisions, and presentations to this, that, and Harry. And I haven’t even touched the other less transparent aspects of working with the system.

I don’t need to tell you the myriad ways in which this affects the morale, profit, and ultimately, the quality of design and the product. This changes our built environment, the minds of people who are making it, and all in all, deprives everyone of an opportunity to focus on the core issues. It almost always tempts the weak and drives away the good (designers).

There is a good practice, propagated during proper processes and in Universities: The practice to declare at the onset that the lowest quote will be out-rightly rejected, motivating people to quote what they think is right, and easing the pressure to compete by reducing the cost.